Understanding Your Homeowners Insurance: Policy Deductibles
Insurance deductibles are thresholds for the amount of money a policyholder must meet in damages or pay at settlement, prior to their insurance coverage stepping in and paying you for covered losses.
Deductibles may be structured in several ways, including:
- A specified dollar amount, based on the coverages selected when the policy was purchased
- A percentage of the claim amount
- A set period of time that must pass before benefits begin
For example, if your deductible is $1,000 and your home experiences a $20,000 covered loss, your insurance carrier will pay you $19,000 once you have paid your deductible. This cost‑sharing structure is a standard component of most home insurance policies and helps keep premiums predictable for policyholders. Generally, the higher the deductible you select, the lower the premium will be for your insurance coverage.
In 2023, according to the Insurance Information Institute, nearly nine out of ten homeowners carry homeowners insurance, a rate driven largely by mortgage‑lender requirements such as escrowed premium payments and annual proof‑of‑insurance verification.
Watch the video below to learn more about deductibles and two of the most common types of deductibles: Hurricane Deductibles and All Other Perils (AOP) Deductibles.
Hurricane Deductibles
With Hurricane Season approaching, it is important to understand what a Hurricane Deductible is and how it is determined. Hurricane deductibles are applied to homeowners insurance policies located in hurricane‑prone states, such as Florida. These deductibles are typically based on a percentage of:
- Coverage A (Dwelling) for homes
- Coverage B (Other Structures) for physical structures that are on your property and not attached to your home
- Coverage C (Personal Property) for condos
- Coverage D (Loss of Use) in the event you are displaced from your home
Hurricane deductibles are applied when storm watches or warnings have been issued for any part of the state.
It is important to keep in mind higher deductibles may be required in higher‑risk areas, such as coastal regions
All Other Perils (AOP) Deductible
The All Other Perils (AOP) Deductible applies to all other covered losses, including events such as:
- Fire
- Theft
- Vandalism
- Lightning
- Other non‑hurricane‑related incidents covered under your homeowners insurance policy
Unlike a hurricane deductible, AOP deductibles are typically based on a fixed dollar amount. These deductibles typically apply to your Coverage A, B, C, and D portions of your policy.
How to Choose Your Deductibles
When purchasing home insurance or making changes to your current policy, an important aspect of determining your deductible is understanding how it will affect your premium. Your premium is the amount of money your insurance coverage will cost.
Key considerations include:
- Higher deductible → lower premium
- Lower deductible → higher premium
- Your ability to comfortably pay the deductible in the event of a claim
- Your home’s location and exposure to hurricane‑related risks
- Your long‑term financial planning and risk tolerance
Although it may seem like a reasonable choice to keep a higher deductible to have a lower premium, you could run into significant financial stress in the event you need to file a claim. Choosing a deductible should balance affordability with your Hurricane preparedness plan.
We recommend taking time to review your policy and deductibles and contact your local insurance agent should you have any questions or need to make changes to your policy. Florida Peninsula is also here to help our policyholders with any questions by calling 877‑229‑2244.